CA Foundation Exam > CA Foundation Questions > In _________ of estimation, national income i...
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In _________ of estimation, national income is calculated by adding wages, rent, interest and profits.
- a)product method
- b)income method
- c)expenditure method
- d)profit method
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
In _________ of estimation, national income is calculated by adding wa...
The Income Method measures national income from the side of payments made to the primary factors of production in the form of rent, wages, interest and profit for their productive services in an accounting year.
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In _________ of estimation, national income is calculated by adding wa...
Explanation:
Definition: National income is the total value of all final goods and services produced within a country in a given time period.
There are three methods of calculating national income which are as follows:
1. Product Method: The product method is also known as the output method. In this method, national income is calculated by adding up the value of all final goods and services produced in a country during a given period of time. This method is based on the concept of value-added.
2. Income Method: The income method of calculating national income is based on the distribution of income in the economy. In this method, national income is calculated by adding up the wages, rent, interest, and profits earned by all the factors of production in the economy during a given period of time.
3. Expenditure Method: The expenditure method of calculating national income is based on the total amount of money spent on final goods and services in the economy during a given period of time. In this method, national income is calculated by adding up the total expenditure on consumption, investment, government purchases, and net exports.
Calculation of National Income by Income Method: The income method of calculating national income is based on the distribution of income in the economy. It is calculated by adding up the wages, rent, interest, and profits earned by all the factors of production in the economy during a given period of time. The following equation shows the calculation of national income by the income method:
National Income = Wages + Rent + Interest + Profits
Where,
Wages = The total amount paid to labor in the economy during a given period of time.
Rent = The total amount paid to landowners in the economy during a given period of time.
Interest = The total amount paid to capital owners in the economy during a given period of time.
Profits = The total amount earned by entrepreneurs in the economy during a given period of time.
Thus, option 'B' is the correct answer as national income is calculated by adding wages, rent, interest, and profits by using the income method.
Definition: National income is the total value of all final goods and services produced within a country in a given time period.
There are three methods of calculating national income which are as follows:
1. Product Method: The product method is also known as the output method. In this method, national income is calculated by adding up the value of all final goods and services produced in a country during a given period of time. This method is based on the concept of value-added.
2. Income Method: The income method of calculating national income is based on the distribution of income in the economy. In this method, national income is calculated by adding up the wages, rent, interest, and profits earned by all the factors of production in the economy during a given period of time.
3. Expenditure Method: The expenditure method of calculating national income is based on the total amount of money spent on final goods and services in the economy during a given period of time. In this method, national income is calculated by adding up the total expenditure on consumption, investment, government purchases, and net exports.
Calculation of National Income by Income Method: The income method of calculating national income is based on the distribution of income in the economy. It is calculated by adding up the wages, rent, interest, and profits earned by all the factors of production in the economy during a given period of time. The following equation shows the calculation of national income by the income method:
National Income = Wages + Rent + Interest + Profits
Where,
Wages = The total amount paid to labor in the economy during a given period of time.
Rent = The total amount paid to landowners in the economy during a given period of time.
Interest = The total amount paid to capital owners in the economy during a given period of time.
Profits = The total amount earned by entrepreneurs in the economy during a given period of time.
Thus, option 'B' is the correct answer as national income is calculated by adding wages, rent, interest, and profits by using the income method.
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In _________ of estimation, national income is calculated by adding wages, rent, interest and profits.a)product methodb)income methodc)expenditure methodd)profit methodCorrect answer is option 'B'. Can you explain this answer?
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In _________ of estimation, national income is calculated by adding wages, rent, interest and profits.a)product methodb)income methodc)expenditure methodd)profit methodCorrect answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about In _________ of estimation, national income is calculated by adding wages, rent, interest and profits.a)product methodb)income methodc)expenditure methodd)profit methodCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In _________ of estimation, national income is calculated by adding wages, rent, interest and profits.a)product methodb)income methodc)expenditure methodd)profit methodCorrect answer is option 'B'. Can you explain this answer?.
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